JAMB UTME - Principles of Accounts - 2019

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The entry to record the purchase of goods for resale on credit costing ₦150,000 from Tosanwumi International on 30th September 20X8 is: Debit: Purchase Account ₦150,000 Credit: Tosanwumi International Account ₦150,000 This means that the Purchase Account is debited with the value of the goods purchased on credit, while the Tosanwumi International Account is credited for the same amount, representing the amount owed to the supplier. The Purchase Account is a nominal account that is used to record the cost of goods purchased for resale or for use in the business. The Tosanwumi International Account is a personal account, specifically a creditor account, used to record the amount owed to Tosanwumi International for the goods purchased on credit. This entry follows the double-entry bookkeeping system, which requires that every transaction has equal debits and credits. The debit entry represents the increase in expenses, while the credit entry represents the increase in liabilities, specifically accounts payable to the supplier.

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The instrument issued by the Minister who authorized an officer to incur expenditure is called a "warrant". A warrant is a legal document that authorizes a government official, usually a financial officer, to spend a specific amount of money from a particular fund or budget. In this context, the Minister issues a warrant to give authority to a specific officer to spend money for a specific purpose. This ensures that government spending is properly authorized and regulated, and helps prevent fraud or misuse of public funds. Therefore, among the options given, the correct answer is "warrant".

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The item that will not appear in the preparation of a control account is option IV only, which is "Provision for bad debts." A control account is a summary account that provides an overview of the individual accounts that make up a particular category, such as debtors or creditors. The purpose of a control account is to reconcile the total balance of individual accounts with the balance in the control account. In the context of accounts receivable, which is money owed to a company by its customers, the control account typically includes transactions such as sales, cash receipts, discounts, and returns. Bad debts, which are accounts that are unlikely to be paid by customers, are also included in the control account. However, the provision for bad debts is a separate account that is used to estimate the amount of bad debts that are likely to occur in the future, and it is not typically included in the control account. In summary, the provision for bad debts is not included in the preparation of a control account, while bad debts, discounts, and returns are typically included.

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In the preparation of accounting records, the owners of the business and the business concerned are treated as separate legal entities. This means that the business is treated as a distinct entity from its owners, and is recognized as having its own financial position, income, and expenses. This is because the business is a separate legal entity, meaning it has its own legal status and is capable of entering into contracts and owning property. For example, if a business takes out a loan, the debt belongs to the business and not to the individual owners. Similarly, if the business makes a profit, the profit belongs to the business and not directly to the owners. Separating the business from its owners in this way allows for a clear and accurate picture of the financial performance of the business, and enables the owners to assess the success of the business as a whole. It also ensures that the business is held responsible for its financial obligations and liabilities, rather than the individual owners.

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To solve this problem, we need to calculate the total profit and then divide it between A and B in the agreed ratio of 3:2. To calculate the total profit, we need to find the difference between the total revenue and the total expenses: Total revenue = Sales + Advert + Wages = ₦3200 + ₦3278 + ₦516 = ₦6994 Total expenses = Purchases = ₦2600 Total profit = Total revenue - Total expenses = ₦6994 - ₦2600 = ₦4394 Now, to divide the profit between A and B in the agreed ratio of 3:2, we need to use the following formula: A's share = (3 / 5) x Total profit B's share = (2 / 5) x Total profit Substituting the values, we get: A's share = (3 / 5) x ₦4394 = ₦2636.40 B's share = (2 / 5) x ₦4394 = ₦1758.60 Therefore, the profit that A will receive is ₦2636.40, and the profit that B will receive is ₦1758.60. Now, let's calculate the settlement amount by adding the profit to the original amount A paid to B: Settlement amount for B = Original amount paid by A + B's share of profit Settlement amount for B = ₦2000 + ₦1758.60 = ₦3758.60 Therefore, the answer is option (C) ₦993.

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The method of stock valuation in which the issue price is obtained by dividing the value of stock in hand by unit of stock in hand is called Weighted Average Price (WAP). WAP is a method of determining the average cost of a stock that a company holds in its inventory. It takes into account the cost of each unit of stock and the number of units held. The total cost of the stock is then divided by the total number of units to determine the average cost per unit. This average cost per unit is then used as the value of the stock for accounting purposes. The WAP method is useful for companies that purchase stocks at different times and different prices, as it provides a more accurate reflection of the value of the stock. It is also useful for companies that sell stock frequently, as it provides a more accurate reflection of the cost of the stock and helps to ensure that the company is not overcharging or undercharging for the stock.

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To calculate the Gross Profit on percentage of sale, we need to use the following formula: Gross Profit Percentage = (Gross Profit / Sales) x 100 First, we need to calculate the Gross Profit, which is the difference between the Sales and Cost of Goods Sold: Gross Profit = Sales - Cost of Goods Sold Gross Profit = 233,000 - 170,000 Gross Profit = 63,000 Next, we can calculate the Gross Profit Percentage using the formula above: Gross Profit Percentage = (Gross Profit / Sales) x 100 Gross Profit Percentage = (63,000 / 233,000) x 100 Gross Profit Percentage = 0.2701 x 100 Gross Profit Percentage = 27.01% Therefore, the Gross Profit on percentage of sale is 27.01%, which means that for every ₦1 of sales, Wazobi Ventures earns a Gross Profit of ₦0.27. The closest option to this answer is 27.0%.

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Discount received is a reduction in the amount paid for goods or services purchased by a company. This reduction is usually given by a supplier to a customer as an incentive to encourage prompt payment or to build customer loyalty. In accounting, discount received is considered a gain for the company and is therefore credited to the profit and loss account. The profit and loss account is an account that records all revenues and gains on one side, and all expenses and losses on the other side, for a particular period. By recording discount received in the profit and loss account, the company can track and report its total gains for a specific period, and also calculate the net profit or loss for that period. This helps the company to make informed decisions about its operations and financial position, and to meet its reporting requirements. Therefore, the correct answer is option (B) - profit and loss account. Discount received is a gain for the company, and it is credited to the profit and loss account to be recorded as part of the company's total gains and revenues for a specific period.

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The two recognized accounting bases are Accrual and Cash. Accrual accounting recognizes economic events regardless of when payment is received or made. This means that transactions are recorded in the accounts when they occur, regardless of when the cash is received or paid. Cash accounting, on the other hand, only recognizes transactions when cash is received or paid. This means that transactions are only recorded in the accounts when the cash changes hands. In simple terms, accrual accounting provides a more complete picture of a company's financial performance, while cash accounting is more focused on the company's actual cash flow.

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When we say that a commercial transaction is a credit transaction, it means that the payment for goods or services is deferred to a future date. In other words, the buyer doesn't pay immediately for the goods they've purchased, but instead, they are given a certain period of time to pay for those goods. This is a common practice in business, as it allows buyers to make purchases without having to pay for them upfront, and it also allows sellers to extend credit to their customers, which can help to build customer loyalty and increase sales. In a credit transaction, an account is usually opened between the buyer and seller, which keeps track of the amount owed and the payment due date. When the payment due date arrives, the buyer is expected to make the payment, which settles the account. It's important to note that in a credit transaction, the item of expenditure doesn't increase. The cost of the goods or services remains the same, but the payment for those goods or services is deferred to a future date.

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Transactions are recorded or posted to the ledger in line with the Double Entry Principle. This principle is the foundation of modern accounting and states that every transaction has two effects: a debit and a credit. Debits and credits must be equal and opposite to keep the accounting equation (assets = liabilities + equity) in balance. So when a transaction occurs, it is analyzed to determine which accounts are affected and how. The debits and credits are then recorded in the ledger, which is a book that contains all the accounts used by a company. Each account has a balance, which reflects the total of all the debits and credits that have been posted to it. For example, let's say a company purchases inventory for $1,000. This transaction affects two accounts: Inventory (an asset) and Accounts Payable (a liability). Using the Double Entry Principle, the company would record a debit of $1,000 to the Inventory account and a credit of $1,000 to the Accounts Payable account. This ensures that the accounting equation stays in balance and that the company's financial statements accurately reflect its financial position. In summary, the Double Entry Principle is the method by which transactions are recorded in the ledger. It ensures that every transaction is properly analyzed and that the resulting debits and credits keep the accounting equation in balance.

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The effect of the transaction will be an increase in the assets of the motor vehicle account and a decrease in the assets of the bank account. When you bought the motor vehicle and paid for it by cheque, you transferred ₦60 from your bank account to the account of the seller. This means that the assets of your bank account decreased by ₦60, while the assets of the motor vehicle account increased by ₦60. In other words, the transaction resulted in the transfer of ₦60 worth of value from your bank account to the motor vehicle account. Therefore, there is no increase in liabilities of the bank account because you did not borrow any money to make the purchase. To summarize, the transaction of buying a motor vehicle and paying for it by cheque resulted in an increase in the assets of the motor vehicle account and a decrease in the assets of the bank account.

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To calculate the gross profit, we need to subtract the cost of goods sold (COGS) from the total revenue (sales). COGS represents the cost of the products that were sold during the period, and it is calculated as: COGS = Opening stock + Purchases - Closing stock In this case, the values are: COGS = ₦20,000 + ₦70,000 - ₦15,000 = ₦75,000 Total revenue (sales) is given as ₦100,000. Therefore, the gross profit can be calculated as: Gross profit = Total revenue - COGS = ₦100,000 - ₦75,000 = ₦25,000 Hence, the answer is option (D) ₦25,000.

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Discount received is usually apportioned to each department on the basis of their purchases. The reason for this is that the discount is typically given by the supplier as a percentage of the total value of goods purchased. Therefore, the more a department purchases from the supplier, the more discount they receive. For example, if a department purchases $10,000 worth of goods and the supplier offers a 5% discount, the department would receive a discount of $500. If another department purchases $5,000 worth of goods from the same supplier, they would only receive a discount of $250. By apportioning the discount on the basis of purchases, each department receives a fair share of the discount based on their contribution to the total purchases from the supplier. This helps to ensure that the discount is allocated in a way that reflects the actual purchasing activity of each department.

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The advantage of double-entry bookkeeping is that it ensures the accuracy of financial records and provides a complete picture of a company's financial transactions. Double-entry bookkeeping is a method of recording financial transactions that involves recording every transaction in at least two accounts, with one account debited and the other credited. This ensures that the total debits always equal the total credits, which means that the books are always in balance. By using double-entry bookkeeping, companies can ensure that their financial records are accurate and complete. They can also quickly identify errors and discrepancies in their records, which can help them to make better financial decisions. In addition, double-entry bookkeeping provides a complete picture of a company's financial transactions. It shows how every transaction affects both sides of the accounting equation (i.e., assets = liabilities + equity), which helps companies to understand the impact of their transactions on their financial position. In summary, the advantage of double-entry bookkeeping is that it ensures the accuracy and completeness of financial records, helps companies to quickly identify errors and discrepancies, and provides a complete picture of a company's financial transactions. It is not related to options such as increasing assets or disbursing cash.

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To calculate the value of goodwill, we need to first calculate the average profit for the past 4 years. We can do this by adding up the profits for each year and then dividing by 4: Average profit = (14,000 + 24,000 + 10,000 + 16,000) / 4 = 16,000 Next, we need to calculate 2 years' purchase of the average profit: 2 x 16,000 = 32,000 Therefore, the value of goodwill is ₦32,000. This is because the value of goodwill is determined by the number of years' purchase of the average profit. Among the options given, the correct answer is 32,000.

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The authorized share capital of Industry Ltd is ₦200,000, which means the maximum amount of money the company can raise from issuing shares is ₦200,000. The company issued 100,000 shares at ₦1 each, so it raised ₦100,000. This means that ₦100,000 of the authorized share capital has been issued. All shareholders paid in full except for two shareholders who owe a total of ₦20,000. This means that the company received a total of ₦80,000 in payment for the issued shares. The unissued capital of the company is the portion of the authorized share capital that has not been issued yet. Since the authorized share capital is ₦200,000, and ₦100,000 has been issued, the unissued capital is ₦100,000. Therefore, the answer is (2) ₦200,000 is the authorized share capital, and ₦100,000 is the unissued capital.

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Shares that are offered to existing shareholders at a discounted price are called a "right issue." This is a type of securities offering that allows existing shareholders the opportunity to purchase additional shares of the company's stock, typically at a price lower than the current market price. The purpose of a right issue is to raise capital for the company and provide existing shareholders with the opportunity to increase their ownership in the company at a favorable price. In a right issue, the company will typically set a record date, which determines which shareholders are eligible to participate in the offering. The shares are then offered to these eligible shareholders in proportion to their existing holdings. The shareholders have the right, but not the obligation, to purchase the additional shares. In conclusion, a right issue is a type of securities offering where existing shareholders are offered the opportunity to purchase additional shares of a company's stock at a discounted price, with the goal of raising capital for the company.

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The opening cash balance can be found by looking at the Receipts and Payments Account. The "Bal b/f" column represents the balance brought forward from the previous period, which is the opening cash balance. In this case, the opening cash balance is ₦3,650, which is the first entry under "Bal b/f" in the Receipts and Payments Account. Therefore, the correct option is (3) ₦3,650.

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Double entry accounting is a method of recording financial transactions in which every transaction is recorded in two accounts: one account is debited and another is credited. This means that for every debit entry (money going out of an account), there must be a corresponding credit entry (money coming into an account), and vice versa. The purpose of double entry accounting is to ensure accuracy and provide a clear and complete record of all financial transactions. This helps to prevent errors and fraud, and allows for easy reconciliation and tracking of financial information.